Correlation Between Superior Drilling and US Silica

Can any of the company-specific risk be diversified away by investing in both Superior Drilling and US Silica at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Superior Drilling and US Silica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Drilling Products and US Silica Holdings, you can compare the effects of market volatilities on Superior Drilling and US Silica and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Superior Drilling with a short position of US Silica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Drilling and US Silica.

Diversification Opportunities for Superior Drilling and US Silica

-0.01

Correlation Coefficient

Superior Drilling  US Silica

Good diversification

The 3 months correlation between Superior and SLCA is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica Holdings and Superior Drilling is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Superior Drilling Products are associated (or correlated) with US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of Superior Drilling i.e., Superior Drilling and US Silica go up and down completely randomly.

Pair Corralation between Superior Drilling and US Silica

If you would invest (100.00) in US Silica Holdings on September 19, 2024 and sell it today you would earn a total of  100.00  from holding US Silica Holdings or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Superior Drilling Products  vs.  US Silica Holdings

Superior Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Drilling Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Superior Drilling is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

US Silica Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Silica Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, US Silica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Superior Drilling and US Silica

The main advantage of trading using opposite Superior Drilling and US Silica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Drilling position performs unexpectedly, US Silica can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in US Silica will offset losses from the drop in US Silica's long position.

The idea behind Superior Drilling Products and US Silica Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.